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Double Taxation Avoidance Agreement Between Hong Kong and India

On March 19, 2018, India and the Hong Kong Special Administrative Region (HKSAR) of China signed a double tax avoidance agreement (DTAA).

The DTAA offers protection from double taxation to over 1,500 Indian businesses with a presence in Hong Kong as well as to Hong Kong-based companies in India.

Other benefits under the DTAA include:

Lower withholding tax (tax deducted at source or TDS) rates that may be 40 percent in the absence of a DTAA, in this case it has been lowered to 10 percent on interest or royalties as long as they can prove that the transaction has not been specifically designed to reduce taxation.

Lower dividend distribution tax (DDT), which is an additional tax levied on foreign investors besides the corporate income tax; and

In certain circumstances, credits for taxes paid on the double-taxed income that can be encashed at a later date.

This DTAA also provides for capital gains taxation of indirect transfers – gains from the sale of shares of a company deriving more than 50 percent of its value from property situated in a country will be taxed in that country.

Chris Devonshire-Elllis of Dezan Shira & Associates comments: “Hong Kong has a very well established Indian diaspora that has been there for decades and has much wealth and business influence within the territory. It is a very positive sign that the DTAA has been agreed as businesses in both India and Hong Kong have finally been given better financial incentives work together and increase trade and prosperity in both their respective areas”.

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Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. With more than 25 years of on-the-ground experience and a large team of lawyers, tax experts and auditors, in addition to researchers and business analysts, we are your partner for growth in Asia.